Samsung used to be known for cheap knockoff electronics. Now it’s a red-hot global brand, thanks to sleek, bold, and beautiful products. It transformed itself by opening to the outside world–and looking deep within its Korean heart.

On the third floor of the Time Warner Center in New York, just below Thomas Keller’s $210-a-plate and perpetually booked restaurant Per Se, is Samsung’s equally sleek offering, where you don’t need a reservation. Walk through the glass doors that look out onto Columbus Circle, pass by a forest of plasma screens, and you’ll see the future as the Korean electronics giant would have it.

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Elegant and austere, the Samsung Experience showroom invites visitors to live, work, and play in a luxurious, fully operational world of network-controlled refrigerators, “hygienic power” vacuum cleaners, nanotechnology-enabled air purifiers, steam-cleaning microwave ovens, ultralight notebook computers, sumo-sized liquid-crystal display TVs, near-silent laser printers, all-in-one digital cameras, and dozens of do-everything cell phones. The place amounts to a temple for the hip and technocentric; on a typical Saturday, it draws more than 1,500 acolytes.

Twelve years ago, Samsung’s enigmatic chairman, Kun-Hee Lee, endured a different kind of experience when he visited a decidedly inelegant electronics retailer in Los Angeles. Lee found his company’s products gathering dust on the store’s back shelves, ignored by even the salespeople. American consumers, he realized, regarded the Korean company’s wares as cheap, toylike knockoffs, best suited for the discount bin. Right there, he decided that Samsung’s very survival in the U.S. market was in peril.

Not long after that visit, Lee issued a manifesto to Samsung’s top executives, which he later repeated in a book, Change Begins With Me. “Management is still clinging to the concept of quantity at the expense of quality,” he declared. “We will become a third-rate company. . . . We must change no matter what.” He implored workers to “change everything except your wife and family”–a decree that’s still talked about within Samsung. To shatter old work habits, he ordered that henceforth, every Samsung employee must report for work two hours early.

Lee’s ultimate aim was simple and audacious: To seize the future, Samsung would have to catapult to the uppermost ranks of the world’s first-class brands; it would have to become a company whose vast array of digital products not only met people’s needs but also captured their imaginations. Today, Samsung has come a long way from its humble, homely past. The consulting outfit Interbrand calculates that it’s the world’s fastest-growing brand over the past five years: Samsung is now the world leader in CDMA cell phones; it’s battling Motorola for the number-two spot, behind Nokia, in total handsets sold; it also tops the global markets for color televisions, flash memory, and LCD panels–key battlegrounds in its quest to one day dominate the digital era. Last year, Samsung racked up $10.3 billion in earnings on $55.3 billion in sales, which made it the world’s most profitable tech company.

This year, to be sure, Samsung has hit some headwind in the form of plunging profits and a political scandal in Korea. And in October, the company agreed to pay a $300 million criminal fine for conspiring to fix computer-chip prices in the United States. Despite those woes, Samsung’s shares are trading at a near record high; it has just launched a global marketing campaign; and it’s on pace to ship

28 million units in the United States alone. Back in its homeland, Samsung might be unloved, but it is greatly respected for its growth, its technological prowess, its 20.7% share of Korea’s total exports, and for transforming the tagline “made in Korea” from a pejorative to a source of pride. Samsung has, indeed, changed everything.

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Steve Jobs is design’s rock star, but a reclusive Korean billionaire may have surpassed him.

The change began with Lee’s bet that in a world where products are rapidly becoming commodities, Samsung would never thrive through scale and pricing power alone. It had to create stylish, premium digital products that sparked customers’ emotions with elegant, human-centered design. Lee foresaw that Samsung could wield design as a competitive weapon and use it to transform itself from an also-ran imitator to a world-class innovator. Steve Jobs may be the rock star of product design, but the reclusive Lee, a 63-year-old billionaire who is little known outside his native country, has arguably done more, on a larger scale, to seize on design’s ability to create great business opportunities. And by some measures, Samsung has even surpassed Apple in the quest for design excellence. Over the past five years, Samsung has won more awards from the Industrial Design Society of America (IDSA) than any other company on the planet. “Samsung is one of the world’s most respected companies for its designs,” says Michelle Berryman, executive vice president of IDSA and a principal at Echo Visualization, an Atlanta-based design consultancy. “Its flat-panel TVs, for example, are so elegant that people are willing to pay a premium for them, just like the iPod.”

Samsung’s success is all the more remarkable given that it was more than a decade in the making. Twelve years ago, Lee dispatched his design adviser, Tamio Fukuda, to assess the state of Samsung design. Fukuda’s conclusion: Samsung lacked a design identity; its product-development process was primitive; and its top managers discounted design’s value.

In other words, Samsung was not unlike most corporations of the day. To change that, the company put years into building a sustainable design culture–one that is simultaneously innovative and global yet reflective of Korea’s ancient culture.

Wired Nation

Today’s Korea just might be the most technologically advanced country on earth. More than 75% of its households are wired with high-speed Internet connections, which operate at many times the speed of U.S. broadband. An equal percentage of Koreans own cell phones; Seoul commuters often pass the time watching live, satellite-TV broadcasts on their handsets. For Samsung, the country amounts to one vast lab for testing consumer reactions to bleeding-edge digital technologies.

For all of its striking modernity, though, Korea remains in many ways a traditional society. Over the past 23 centuries, the Korean peninsula was repeatedly conquered and occupied by China, Mongolia, and Japan, each of which left behind its own indelible, cultural imprint. Chief among them is a neo-Confucian mode of thinking that values authority and order above all else. As chairman, Lee commands absolute respect within Samsung; as one designer put it, his pronouncements “are like a page out of the Bible.” In one such pronouncement, Lee issued a clarion call for making design a core asset in the company’s bid to transform itself: “An enterprise’s most vital assets lie in its design and other creative capabilities. I believe that the ultimate winners of the 21st century will be determined by these skills.” The quotation, framed, occupies a place of honor in a corner office belonging to Kook Hyun Chung, chief of Samsung’s Corporate Design Center. “To hear, from the chairman’s own mouth, how much he valued design was absolutely shocking,” Chung says.

Lee could issue edicts. He could send a delegation of Samsung executives to the Art Center College of Design, in Pasadena, California, to lay plans to launch an in-house design school at Samsung. He could quickly build a $10 million, state-of-the-art facility in downtown Seoul to house the result, the Innovative Design Lab of Samsung, or IDS. And he could add millions more to fund the school’s programs and pay the student designers’ salaries. But even the Emperor of Samsung couldn’t change the corporate mind-set, which was imitative, hypercompetitive, and ultraresistant to change.

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Samsung–the name means “three stars” in Korean–was founded by Lee’s father in 1938 as an exporter of rice, sugar, and fish. And Samsung, at its core, remained a commodity company well into the 1990s. Many of its managers couldn’t–or wouldn’t–value design. “Samsung was a technology company whose management thinking came out of exporting rice,” says Gordon Bruce, a veteran design consultant who, along with fellow Art Center faculty member James Miho, helped Samsung set up IDS. “There was no design involved. It was all about keeping the price down and outselling the other guy.”

When Bruce and Miho, a pioneering graphic designer, audited the state of Samsung design, other problems quickly surfaced: The company’s neo-Confucian culture led its designers to imitate the masters of their industry, which at that time were Sony and IBM. The result: Samsung failed to develop a distinctive design identity of its own. The company’s middle managers were so competitive that they kept ideas to themselves–“the place was just shark infested,” says Bruce–which stymied efforts to create a collaborative, risk-taking environment. And because

Samsung’s engineers controlled the product-development process, engineering constraints choked off any notion of design’s becoming an end in itself.

Bruce and Miho soon realized that a Western-style curriculum modeled on the Art Center’s program would never meet the needs of Samsung’s designers. They had to find a way to make managers allies of design. But the biggest challenge of all was to unlearn old, ingrained ways of thinking–to create a new Samsung mind.

Summoning the Gaiatsu

Bruce and Miho threw out the Art Center’s curriculum and invented something new. Some of the resulting initiatives were highly tactical–quick hits aimed at forging a collaborative work environment. Designers were required to take a yearlong course in mechanical engineering to better prepare them to defend their ideas. “Before they could design a product, they had to know how to make it work,” Bruce says. Up-and-coming engineers and managers from other disciplines were also brought into IDS so they could learn to work with designers–and designers could learn to work with them. Such partnerships are the principle behind Samsung’s Creating New Business Group, an elite team of designers, technologists, and experts in marketing and manufacturing, who study consumers and create what-if scenarios, all in an effort to glean the world’s future buying habits.

IDS also took on the larger challenge of breaking the Korean practice of education through memorization. Now the students would learn by doing. To gain a better understanding of their own cultural heritage, for example, they produced a DVD on Sokkuram, a mountain shrine that houses a peerless eighth-century statue of Buddha.

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Often, progress came slowly. In one class assignment, Bruce asked his students to present what they considered to be a perfectly designed object. His own choice: a banana. “Nature is the best designer,” he told them. “The banana fits in your pocket. It comes in its own sanitary package. It’s biodegradable. And the color indicates when the fruit is ripe.” For a moment, a befuddled silence cloaked the class. Then came a question: “You mean,” asked one student, “you want us to design a cell phone in the shape of a banana?”

Miho decided that Samsung’s designers most needed a gaiatsu, the Japanese term for an outside force that delivers great change. He wanted IDS’s students to experience profoundly original ideas at the source. And so Samsung’s gaiatsu became the world at large. Miho and Bruce launched the Global Design Workshop, a traveling tutorial in which a couple dozen students visited the world’s great design centers: Athens, Delhi, Florence, London, New York, and beyond. “In Paris, we discussed the designs of the Imperial Class of Louis XIV,” Miho recalls. “In Berlin, we saw how Germany was once divided, just like Korea is now–and yet the Germans still produced incredibly original designs, like the Mercedes-Benz. We visited the Smithsonian Institution in Washington and saw the earliest model of the Apple computer. They were surprised by how primitive it looked, but they finally understood that it’s the idea that matters.”

Samsung has continued, through its Design Power Program, to send its most promising designers to study at the world’s top universities and institutions. And the company has beefed up its global presence by launching design studios in London, Los Angeles, Milan, San Francisco, Shanghai, and Tokyo.

Defining an Identity

Samsung’s instinct was to develop a design language that grew out of Korean culture.

Samsung’s in-house school gave its designers the tools and confidence to risk thinking differently. But there remained an equally vexing challenge: The company lacked a universal design ethos–a measurable, clearly defined set of principles that its designers could replicate and its customers could intuitively understand. Samsung’s instinct was to develop a design language that grew out of Korean culture. But that proved equally hard to define. China’s Han, Ming, and Tung dynasties, as well as the Mongols, Russians, Japanese, and even American missionaries had all left elements of their cultures on the peninsula. Unearthing a true Korean character proved difficult, but Samsung discovered it in the Tae Kuk–the yin-yang symbol found on the South Korean flag that represents the simultaneous unity and duality of all things. From the Tae Kuk, Samsung developed its touchstone: “Balance of Reason and Feeling.”

“Reason and feeling are opposites, but they are essential to each other,” says Sangyeon Lee, who heads Samsung’s San Francisco design studio. “In design terms, ‘reason’ is rational, sharp-edged, and very geometric. ‘Feeling’ is soft and organic–it makes an emotional connection with the user. Taken together, reason and feeling give us a way to frame our design identity, which is always evolving.”

A task force spent a year developing and perfecting a scale, with reason at one end and feeling on the other, which is now used to ensure that every single product design hews to Samsung’s brand positioning. That generally falls near the scale’s center–thereby striking a balance. Samsung did the same with two other key words: “simplicity” and “complexity.”

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Here, Samsung generally hews closer to simplicity–it wants its designs to be intuitive and humanistic. Samsung even maps its competitors on the two scales:

In one recent analysis, Apple occupied the “simplicity/feeling” zone, with Sony in the “complexity/reason” field. Samsung seeks out the areas where there are no competitors–that’s where opportunity lies.

Samsung undertook a particularly difficult balancing act with its design for the YP-T8 portable media player, which hit the North American market this fall. The company’s product planners landed heavily on the “reason/complexity” end of the spectrum by stuffing the palm-sized gadget with features: FM radio, voice recorder, photo viewer, text viewer, game functions, and video and audio playback. The device was packed with so many functions that its initial, rough design was “machinelike and rectangular–not so user friendly,” recalls Miri Lee, the T8’s Seoul-based designer.

To strike the right balance on the T8’s design continuum, Miri Lee had to pull the device back to the center, toward “feeling/simplicity.” Lee began by drawing a series of squares, each containing a different product spec. She layered the squares on top of one another, hoping to find a form that could elegantly contain the device’s functions. “Each square was like a black hole that took in all my thoughts,” she says. “The more squares I drew, the more design problems I had to resolve.”

Lee strove to give the device a soft, feminine feel, with a curved shape so users could grip and operate it easily with one hand. Her design team struggled to pare away as many control keys as possible. Eventually, they came up with three clickable buttons that are centered beneath an outsized, horizontal LCD screen. They spent additional weeks tweaking every detail, from the fit and finish of the T8’s silicone case to the color and size of the fonts on the display screen, all in an effort to give the device a minimalist look and feel. Lee refined the T8’s cell-phone-like shape by dipping into Samsung’s Idea Bank–a global database of design concepts that initially failed to find their way to market but are valuable enough to be recycled into new products at a later date. There, she found the basic design language for the T8’s rounded shape and large screen, then translated it to better fit the tiny media player.

How did Lee know she had struck the right balance between form and function? She says she simply felt it in her gut. And that’s a sure sign, as Sangyeon Lee suggests, that designers have found a Tae Kuk unity and duality of their own: They are simultaneously thinking for themselves and thinking the Samsung way.